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Fed Governor Bowman: Rate Hikes Still on the Table if Inflation Fails to Improve
Federal Reserve Governor Michelle Bowman emphasized her willingness to raise interest rates if inflation does not show significant improvement. Speaking in London, Bowman stated that the current economic conditions do not justify lowering interest rates, and she remains open to further rate hikes if inflation does not sustainably move towards the 2% target.
Bowman's comments align with the prevailing sentiment among central bankers, who are cautious about reducing rates without concrete evidence of inflation's downward trend. Recent data has shown moderate progress, but the Federal Open Market Committee noted that there has been only "est further progress." Bowman highlighted the upside risks that could accelerate the inflation outlook, making her cautious in considering future policy changes.
The Commerce Department is set to release the personal consumption expenditures (PCE) reading, the Fed's preferred inflation gauge, which economists expect to show a 12-month inflation rate of 2% for both all-items and core PCE. Bowman expects the Fed to maintain its borrowing rate between 0.25% and 5% for some time.
Bowman's stance diverges from other central banks, such as the Central Bank, which recently lowered its rate by a quarter point. She emphasized that the path of policy in the coming months will differ from that of advanced economies.
Other Fed officials have also expressed caution about rate cuts. San Francisco Fed President Mary Daly rejected the idea of a preemptive cut, stating that it is essential to "finish the job" and ensure inflation reaches the target. Austan Goolsbee, another Fed President, suggested that if he sees more months of good inflation data, he would reassess whether policy needs to be as restrictive as it has been.
Original Article: https://www.cnbc.com/2024/06/25/fed-governor-bowman-says-shes-still-open-to-raising-rates-if-inflation-doesnt-improve.html
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